Regional Revolving Loans

There is a positive climate for entrepreneurs to obtain capital in Western South Dakota thanks to the loan programs administered by the West River Business Service Center. Loan programs are available for business start-ups or expansions at competitive rates. Eligibility for a loan is determined by the guidelines and requirements for each loan program. The West River Business Service Center staff can assist in determining which program is best suited for a project.

In addition to the loan programs, the West River Business Service Center offers free consulting for developing business plans, tapping into market research, and creating marketing strategies.

One loan program administered by the West River Business Service Center is described as follows:

Initiated in 1999, this fund makes available up to $250,000 for a wide range of uses: feasibility studies, business start-up costs, purchase or development of land, infrastructure or the purchase of equipment. The applicant must demonstrate repayment capability. Loans are available in most western South Dakota counties, through the U.S. Department of Agriculture's Rural Development funding. Applicants must show at least 10 percent owner equity. Collateral to secure the loan will be required in the form of land, buildings, equipment, or other assets. The repayment period is generally no longer than 10 years.

SBA Lending


This long established program has had a great impact on South Dakota business development over the years. Funds are available for fixed assets such as land, buildings, and equipment. No working capital, inventory, venture capital or refinancing loans are eligible. Borrowers must be for-profit businesses with a net worth less than $6 million, and whose after-tax profits the past two years have averaged less than $2 million. An operation not meeting those standards might still be considered a small business based on its number of employees, a number that varies depending on the type of business.

Administered by the Black Hills Community Economic Development, Inc., the program works with banks and businesses on what's known as a 50-40-10 structure. That means a regulated lender typically provides fifty percent of the financing and receives a first mortgage position on all project collateral. Forty percent is provided by the Black Hills Community Economic Development, Inc which sells debentures guaranteed by SBA and receives a subordinated collateral position. The remaining ten percent is provided by the borrower in a cash equity injection. Black Hills Community Economic Development's portion may range from a minimum of $50,000 to a maximum of $1.3 million. Finance rates are fixed for the repayment period, usually 10-20 years.

Jackson-Kadoka Economic Development Corporation

GROW SD SBA Intermediary Lending Program (ILPP)

§  Statewide coverage area

§  Maximum Loan $200,000

§  Loan Guidelines:

ü  Maximum $200,000 per borrower

ü  Interest rates between 5%-6% typically

ü  Maximum loan fee = 1% plus all direct costs

ü  Must document in loan file why the borrower could not obtain credit elsewhere at similar rates

ü  Working capital, real estate, acquisition of materials, supplies, and equipment.

TypTax Incentives available throught he Govenors Office of Economic Development
We Can’t Be Beat

From South Dakota’s financing programs to the state’s unbeatable tax climate, doing business in South Dakota just makes sense. We are the only state in the nation where companies don’t pay personal income, corporate income, inheritance, business inventory or personal property taxes. South Dakota also offers tax refunds on sales, use and contractors' excise taxes.

Tax Climate

While South Dakota’s tax climate is second to none, there are a few business taxes and costs your company will have to pay in South Dakota. They include: sales, use, real property, unemployment and workers compensation.

Tax Refunds

To be eligible for a tax refund:

The total cost of the project must be a minimum of $10 million
The project must involve the construction of a new facility or the expansion of an existing facility

Refunds are issued for the following:

Sales tax paid on equipment
Contractors’ excise tax
The sales tax the contractor pays on materials used in the new construction.

Project Costs Refund
Less than $10 million None
$10 to $40 million 45%
$40 to $500 million 55%
More than $500 million None


The amount of the refund on the sales, use, and contractors’ excise tax is determined by the total project costs.

Costs incurred prior to December 31, 2012, are eligible for refunds. An application must be approved within 180 days of the start of construction.

* Projects related to wind energy (wind farms, transmission lines, and the manufacturing of wind energy components) are eligible for the 55% refund on costs in excess of $500 million.

REDI Fund Loans


We give new meaning to the phrase "ready, willing and able." Our REDI (Revolving Economic Development and Initiative) Fund is designed to help promote job growth in South Dakota. This low-interest loan fund is available to start-up firms, businesses that are expanding or relocating and local economic development corporations.

How it Works

The REDI Fund provides up to 45 percent of a project's total cost. Companies should secure interim (construction) financing, matching funds for permanent financing and be able to provide a 10 percent minimum equity contribution before applying to the Board of Economic Development for a REDI Fund loan.

Costs eligible for participation may include:

the purchase of land and the associated site improvements
construction, acquisition or renovation of buildings
the purchase and installation of machinery and equipment.

Costs that are NOT eligible include:

refinancing of existing debt
short-term, interim financing for the construction or acquisition phase of a project
trade receivables
other working capital needs
preliminary design stage costs which include, but are not limited to market research, written cost estimates, development of business plan
preliminary product development costs


Interest rates have remained at 3 percent since the program's inception, and loans are amortized up to 20 years on land and buildings, and 10 years on equipment, with a balloon payment due after five years.


SBA 504


The SBA 504 loan program offers subordinated, fixed rate financing to healthy and expanding small businesses. Long-tem, fixed rate financing (10-20 years) and reasonable rates (near long-term U.S. Treasury bond rates), make the 504 Program an attractive and effective economic development financing tool.


Type of Financing: The 504 Program is available for fixed asset purchases only: land, building, and equipment with a useful life of 10 years or more. Working capital, inventory, and venture capital are NOT eligible.

SBA 504 financing is "permanent" take-out mortgage financing. Interim or construction financing must be utilized to complete the project.

Eligible Businesses: Eligible borrowers are user, for-profit businesses. Ineligible businesses include not-for-profit, passive investment and real estate companies, financial institutions, developer/landlord arrangement, ventures, private recreation facilities and unregulated media firms.

Size Requirements: The net worth of an eligible business may not exceed 8.0 million. Its net profit after taxes must not have exceeded an average of $3.0 million during the previous two years. Should a company fail to meet these standards, the company will still be considered a small business if it meets size requirements, based on the number of employees, which vary among the different industries depending on NAICS codes.

How the Program Works

Structure: Typically the 504 loan has a 50-40-10 structure where 50 percent of the project is financed by a regulated lender that receives a first mortgage position on all project collateral. Forty percent is provided by the South Dakota Development Corporation, which sells debentures guaranteed by SBA and receives a subordinated collateral position. The remaining 10 percent is provided by the borrower in a cash equity injection. This is the minimum equity contribution and depending on the project, and available personal resources, the SDDC may require a larger contribution.
*Start-up businesses or single-purpose facilities require an additional equity contribution of 5 percent. If the business meets both of these criteria, a 20 percent equity contribution is required.

Regulated Lender: At least 50 percent of the project cost must be provided from "non-federal" sources, such as commercial banks, S&Ls, saving banks, insurance companies and equity contributions. The lender will receive a first position on the assets acquired with the loan proceeds. The maturity of this loan must be at least 7 to 10 years, depending on the amortization of the SBA loan, and have an interest rate which is "legal and reasonable,” fixed or variable and may be renegotiable. The renegotiation formula must be stated in advance.

South Dakota Development Corporation: Eligible businesses may borrow up to $5,000,000 with a minimum of a $50,000 loan being obtained through the SDDC. Loan amounts available for small manufacturing are $5,500,000. The SDDC portion of the project may not exceed 40 percent of the eligible project costs, nor can the SDDC portion exceed the first mortgage amount. The goal of the program is to create at least one job for each $65,000 of debenture or one job for each $100,000 for small manufacturing. Personal/corporate guarantees are required of all individuals or entities having 10 percent or more ownership in the business and may be required for managers who occupy key positions that are vital to repayment ability, regardless of their ownership percentages.

The SDDC sells debentures, guaranteed by SBA, with a 10 or 20 year maturity based upon the weighted average of the useful life of the assets purchased with the loan proceeds. The rate of interest is fixed for the term of the loan and determined at the time of sale of the debenture, which is based on the current average market yield. There are various one-time fees associated with the 504 loans. The one-time processing fees total approximately 3.25 percent and are added to the loan amount. On-going servicing fees are added to the interest rate and include fees to the Central Servicing Agent, the SDDC and SBA. In addition, a 0.5 percent fee is payable by the first mortgage lender to the SBA.

Equity Injection: The borrower generally provides at least 10 percent of the project cost in the form of a cash equity injection.




Project Costs:
Acquire Land and Building $300,000
Renovate Building $50,000
Acquire Equipment $300,000
Total Project Cost $650, 000


Typical Structure:


Conventional loan; first mortgage 10 yr. term, market rate of int. SDDC; second mortgage $325, 000 (50%)
20 yer. term, debenture rate plus servicing fee $260,000 (40%)
Small Business concern, down payment $65,000 (10%)
Total Project Cost 650, 000 (100%)


The APEX (Agricultural Processing and Export) Loan Program is designed to assist companies in communities with a population of 25,000 or less, which add value to raw agricultural products through processing, or export a minimum of 75 percent of its product to entities outside the State of South Dakota or replace an import. The program is open to for-profit businesses and local economic development corporations.

How it Works

This program may provide up to 75 percent of the total project cost and requires the applicant to secure the other funds before applying for the APEX loan, including a 10 percent minimum equity contribution. The maximum loan amount available from the APEX program is up to $250,000. Eligible project costs include the purchase of land and the associated site improvements, the purchase and installation of machinery and equipment, the construction, acquisition or renovation of a building, and fees, services and other costs associated with construction.


The interest rate is three percent, depending upon the risk of the project and the amount of participation by APEX. The interest rate will be determined at loan consideration and will be fixed for the life of the loan. The loans are amortized over the useful life of the assets being financed.

For Small Businesses

The MicroLOAN South Dakota Loan Program is a partnership with the Board of Economic Development, South Dakota Development Corporation, and Governor's Office of Economic Development. These loans are made available to small businesses within the borders of South Dakota and South Dakota residents, including main street and retail operations, for working capital, equipment, real estate or other fixed asset project costs.

MicroLoan Express

The MicroLOAN Express operates in the same fashion as the MicroLOAN, with the following exceptions:

If an applicant qualifies under the policies and procedures of the MicroLOAN and they receive bank or credit union approval, approval under the MicroLOAN Express will be automatic as long as the MicroLOAN Express portion is in a pro-rata first collateral position with the bank or credit union.

The bank or credit union must file all of the documents it requires of the applicant, as well as all internal documents relating to the loan with the Governor's Office of Economic Development in order to receive the paperwork relating to the MicroLOAN Express loan.

Bond Financing

Another financing option is the pooled loan program through South Dakota's Economic Development Finance Authority. This loan program, designed for more capital-intensive projects, provides small businesses access to larger capital markets for tax-exempt or taxable bond issuances. The program can fund projects individually or pool them to help lower the cost of the bond issuance. One of the biggest advantages of this program is a long-term loan with a fixed interest rate. A major benefit to borrowers is the South Dakota Economic Development Finance Authority's "A+" rating by Standard and Poor's. By maintaining an "A+" rating, the Authority is able to offer a lower interest rate to the applicant.

Stand-Alone Issuance

Individuals may also apply for Stand-Alone Bond Issuances when there is a need for an authorized issuing agency. The application below needs to be completed for these requests as well.

Who's Eligible

All for-profit businesses that are engaged in the operation of an industrial, ag processing or manufacturing business may apply for bond financing through the South Dakota Economic Development Finance Authority.

How it Works

The bonds can be either taxable or tax-exempt. To qualify for tax-exempt financing the borrower must be a manufacturer and total project costs must be less than $20,000,000. Bond proceeds can be used to finance 80 percent of new construction or purchase of existing building, and 75 percent of new equipment costs, with no greater than 25 percent of the bond proceeds being used for ancillary activities such as office or inventory space.

South Dakota WORKS
Program Overview

Business/commercial loans for businesses needing working capital
Term of 1 to 3 years
Loan amount up to $1 million with a minimum amount of $20,000

Eligible Borrowers

Businesses seeking new financing
Certified development financial institutions
Meet US Treasury guidelines
Only have one WORKS loan program at a time for a company

Ineligible Borrowers

Speculative development
Lending institutions, insurance companies
Businesses engaged in pyramid sales
Gambling concerns and private clubs
Businesses engaged in activities prohibited by law

Eligible Use of Funds

Business purposes including: start up costs, working capital, payroll, inventory needs and new construction loans

Ineligible Use of Funds

Purchase, construction, renovation, or tenant improvements of an eligible place of a business that is for passive real estate investment purposes
Refinancing purposes
Repay delinquent federal or state income taxes
Repay taxes held in trust or escrow
Reimburse funds owed to any owner
Purchase any ownership interest of any owner


80% Bank or Private Debt
20% SD WORKS Loan

The Process

The application packet is submitted to GOED loan officer for review
SD WORKS loan review committee will meet to review the application once a month

Private Lender Participation

The bank or credit union must file all of the applicant’s documents they require, as well as all internal documents relating to the loan with the GOED, or the borrower needs to submit a SD WORKS application to the GOED


Second on assets that banks or private lenders take as collateral


$100 application fee

Value-Added Ag Subfund

In 1999, a $3 million fund was created specifically to assist in funding feasibility and marketing studies for prospective value-added ag business. This Subfund of the REDI Fund is just one step toward improving value-added ag in South Dakota.

By partnering with the Department of Agriculture, local communities, commodity organizations and others, the Governor's Office of Economic Development will work with you to take your project from conception to completion. Our goal is threefold:

To find niche markets that will add value to South Dakota ag commodities
To help fund marketing and feasibility studies
To help assemble the right people, capital and labor to ensure a successful project.

How it Works

Assemble background information on the proposed ag project and contact GOED.
Complete the program application and submit it to GOED.
GOED staff will review the application, determine eligibility and contact the applicant. Eligible applications will be presented to the SD Board of Economic Development for consideration.

If approved, proceed with the feasibility or marketing study.

Who's Eligible & Terms

Any for-profit business, nonprofit cooperative or group that forms an eligible legal entity may apply for a loan from the subfund.
Loans cannot exceed more than 45 percent of the total eligible project costs for marketing or feasibility study expenses.
Applicant must provide equity contribution of at least 10 percent of the total project cost for marketing and/or feasibility study expenses.
Applications can be submitted at any time.
The staff of the GOED will screen all applications for completeness and eligibility requirements within 30 days of receiving it.
Loan proceeds may be used for salaries, consultant contracts, supplies and necessary services for feasibility or marketing studies.
The maturity of a VASF loan may not be more than five years with regular payments amortized over not more than 20 years.

Workforce Development Program
Train Your Employees

When it comes to training, South Dakota puts its money where its mouth is. Through our Workforce Development Program, companies have access to dollars to help train new AND existing employees. Think your business could benefit by upgrading your employee's skills? Click on the links below to find out more.

The Governor's Office of Economic Development will provide technical assistance to help develop the Workforce Development Program application. Technical assistance is provided to help identify approaches and ideas necessary to develop a successful project.


For more information on any of these programs please go to your paragraph here.